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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Entry of new firms shifts the cost curves for all firms downward






2. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






3. Ei > 1






4. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






5. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






6. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






7. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






8. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






9. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






10. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






11. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






12. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






13. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






14. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






15. When firms focus their resources on production of goods for which they have comparative advantage






16. Exists if a producer can produce more of a good than all other producers






17. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






18. The lost net benefit to society caused by a movement away from the competitive market equilibrium






19. Ed = 8 - infinite change in demand to price change






20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






21. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






22. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






23. Ed = (%dQd)/(%dP). Ignore negative sign






24. Ed = 0 - no response to price change






25. The ability to set the price above the perfectly competitive level






26. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






27. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






28. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






29. MUx / Px = MUy/Py or MUx/MUy = Px/Py






30. Two goods are consumer substitutes if they provide essentially the same utility to consumers






31. The imbalance between limited productive resources and unlimited human wants






32. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






33. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






34. 0 < Ei < 1






35. Ei = (%dQd good X)/(%d Income)






36. Ed = 1






37. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






38. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






39. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






40. Costs that change with the level of output. If output is zero - so are TVCs.






41. The total quantity - or total output of a good produced at each quantity of labor employed






42. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






43. The output where ATC is minimized and economic profit is zero






44. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






45. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






46. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






47. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






48. Entry of new firms shifts the cost curves for all firms upward






49. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






50. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run